Deciding to enter a strategic partnership can be one of the biggest decisions you can make for your business. Whether it becomes a fruitful, long-lasting relationship or not, one thing is definite, it will alter the shape and scope of your current operations today—and your vision for tomorrow.
Ensuring that your strategic partnership is all that you expect and more is not easy. In fact, things can go south if you’re not careful, and issues like contract disputes and underperforming partnership campaigns do happen. This is why there needs to be a contingency plan in place or defined legal paperwork and agreements you can refer to, something that we stressed in a previous blog.
Before you commit yourself and your business to a partnership, it is essential that you have taken the time to evaluate a potential partner to ensure that they are right for you and your business’ vision. The primary reason partnerships fail is because people rush into them—would you marry someone on the first date? Why would you partner after just a couple of meetings? In many cases the right strategic or marketing partnership will give you what you need so you don’t necessarily need to go into business together—but if you do plan to do this, take your time and find opportunities to get wins before you go into any joint venture. Make sure to watch out for these key things before you sign on the dotted line.
Conflicting Values and Target Markets
Just like a healthy marriage, a strategic partnership doesn’t stand a chance without shared values. For example, if your company is all about being at the cutting-edge of your industry and sees constant change as important and you want to form a partnership with a business that values tradition above all else, then the partnership may never get off the ground in the first place. Ensuring you have a compatible target market with your potential partner is also important, as this can be another source of conflict or miscommunication if the fit isn’t right. This is especially essential in marketing partnerships, as joint campaigns with misaligned partners are likely to cause confusion at best, and conflict or alienation at worst among the audience.
Subway and Sony’s pre-launch campaign for the PlayStation game Uncharted 3 is a nice example of a successful strategic partnership due to their overlapping target market. Through the deal, players gained exclusive access to select in-game content by buying special Subway items—a month before the game was officially launched. This built up hype for the game’s launch as well as produce important feedback on the game, both of which were good for Sony’s PlayStation brand, while also encouraging customers to purchase Subway items and strengthening Subway’s position as a well-known fast food for gamers.
We also discussed in a previous blog the other key reasons why having non-conflicting values is important for a partnership. In fact, it’s one of the golden rules of forming a partnership; you can learn more about the other golden rules by clicking here.
Lack of Appropriate Transparency
A potential partner that is not willing to share relevant information—especially financial—is a definite red flag. Both parties should be clear about:
• How each party benefits from the partnership
• What they need to do
• Target markets and values
• How each has coped with market downturns
• Relevant information pertaining to past dealings and financial success or woes
• How each party makes a profit from the partnership (if monetary rewards are part of the deal)
• The intention, vision and objectives of the partnership
A lack of transparency makes a strategic partnership a potential risk by basically forcing you to be in the dark, preventing you from knowing important information that will give you a better chance at making the partnership work, coming up with contingency plans or protective clauses in your agreement, or making the right decision in terms of whether or not you should enter the partnership in the first place.
You don’t have to share everything (and the same goes for your partner). However, we can all agree that sharing information relevant to the partnership at the appropriate time, by both parties, is important to success – but it should go both ways, be based on trust built and earned, and both parties should be proactive about protecting their interests and the overall success of the relationship.
Big Ideas, Little Substance
Especially in a strategic partnership between two businesses or entrepreneurs, this is something you should be particularly wary of. When someone promises you the world, you want to know if that they really plan to deliver is an Atlas!
Look for partners that can offer you and your business realistic advantages based on their current skill set and past business accomplishments. A business which talks about joining forces and conquering your entire industry through a partnership may just be a business with a bunch of people who like to dream, and can even come up with excellent ideas, but they may need to grow more professionally before you want to commit to them. Also, you want partners to be forthcoming about their own weaknesses as an individual and as an organisation. This is a sign that they are realistic about what they can deliver and are more likely to be true to their word.
You don’t want to end up in a binding legal agreement that may be difficult to get out of with someone or an organisation that can’t live up to their promises. Keep this in mind, as in some cases, even verbal agreements can be binding. Also, never sign a memorandum of understanding or any other seemingly minor contract just because your partner sells you on their big idea. It’s better to play it safe and have every agreement reviewed thoroughly and, if possible, by a legal professional, depending on your assessment of the risk of something going wrong and the potential impact on your business. If you’re unsure it’s wise to get further advice before signing anything.
Are You Partnering for the Right Reasons?
Most importantly, ensure that you are looking for a strategic partnership for the right reasons. For example, if you want a partner to help you out with your financial troubles, then you may want to consider other options as well.
If you need financing then consider options like having a lender or an investor. If you’re looking at a partnership for financing purposes, make sure that all financial considerations and factors as well as terms, conditions, and obligations for now and for the future for both parties are reviewed carefully and agreed upon. You don’t want to get stuck with a partnership that’s only good for the short-term in terms of money but will be a big burden overall in the long-term, do you?
A partnership is a commitment that shouldn’t be taken lightly and can make or break your business. We at Partner2Grow take pride in helping businesses make the right decisions in terms of entering and making a strategic partnership work, making success and sustainable progress possible. If you’re seeking partnership advice or want to build partnership capability, we’ll be happy to help you out so get in touch.